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Report No. 199

Canada: (substantive unfairness)

The British Columbia Law Institute, in its Interim Report on 'Unfair Contract Terms' (2005) stated that the Report will concern itself with two questions:

a. review of specific contract terms, and

b. applications of principles of contractual fairness in areas other than consumer protection.

The Report employs the word 'unfair' in the place of 'unconscionable'. It treats cases of automatic renewals, acceleration clauses ( i.e. . payment of an amount on the happening of an event), terms excluding or limiting liability as substantively unfair. It also requires that it is the duty of the party which takes advantage of onerous terms to put the other party on special notice of such terms. Fundamental breach of a contract regulates the enforcement of contract-terms that limit or exclude liability by presenting a party who breaches a contract from relying on those contract terms. Whenever a Court determined that a fundamental breach occurred, the contract would be 'brought to an end' and the rule of law would operate. The Interim Report refers to various options -

All the common law provinces have an Unconscionable Transaction Relief Act which allows for the reopening of unfair credit transactions. In Canadian jurisdictions unconscionable conduct is an offence.

Ontario Business Practices Act, 1990 states that unconscionability includes where

"(i) the price grossly exceeds the price at which similar goods or services are readily available to consumers,

(ii) the proposed transaction is excessively one-sided in favour of someone other than the consumer or

(iii) the terms or conditions of the proposed transaction are so adverse to the consumer as to be inequitable."

The Sasketchewan Consumer Protection Act, 1998 prohibits unfair practices and refers to (a) the 'taking advantage of a consumer by including in a consumer agreement terms or conditions that are harsh, oppressive or excessively one-sided; and (b) include in a consumer transaction terms or conditions that are harsh, oppressive or excessively one-sided.

The Trade Practices Act, 1996 of British Columbia, apart from procedural matters include where

(a) at the time the consumer transaction was entered, the price grossly exceeded the price at which similar subjects of similar consumer transactions were readily obtainable by similar consumers; and

(b) the terms or conditions on, or subject to, which the consumer transactions were entered into by the consumers are so harsh or adverse to the consumer as to be inequitable.

The Quebec Civil Code, 1991, states in section 1435 that in a consumer contract or a contract of adhesion, however, an external clause is null, if, at the time of formation of the contract, it was not expressly brought to the attention of the consumer or adhering party, unless the other party proves that the consumer or adhering party otherwise knew it.

Section 1436 refers to clauses which are illegible or incomprehensible to a reasonable person unless the other party proves that an adequate explanation of the nature and scope of the clause was given to the consumer or adhering party.

Section 1437 describes an 'abusive' clause as one which is excessively and unreasonably detrimental to the consumer or the adhering party and is, therefore, not in good faith; in particular, a clause which so departs from the fundamental obligations arising from the rules normally governing the contract that it changes the nature of the case. Such clauses can be declared null or the obligations may be reduced.

Unfair (Procedural and Substantive) Terms in Contract Back

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